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m (Stock:Whole Foods Market (WFMI)/Bears/Consumer Slowdown Points to Fall in Revenues moved to Stock:Whole Foods Market (WFM)/Bears/Whole Foods Market (WFMI)/Bears/Consumer Slowdown Points to Fall in Revenues)
High inflation, a weakening employment market, falling home prices and reduced credit all bode ill for Whole Foods. Although many previously assumed that higher income consumers were immune to a slowdown in spending, WFMI's FY 2008 results have so far proven otherwise. Once high-flying CEO John Mackey reported that "Today's economic environment is the most challenging I have experienced in my 30 years in retail."
"Assuming no dramatic change in economic trends, we are planning for total sales growth in fiscal 2009 of 6% to 10%. We expect comparable store sales growth of 1% to 5% and identical store sales growth of zero to 4%." Whole Foods CEO John Mackey. These conditional predictions are useless.
Just two years ago organic foods and grocery items were not widely available, leaving Whole Foods as the only real option. Since then offerings at all food retailers have exploded. For instance, when my boys were born years ago we had to go to Whole Foods to get the "Earths Best" baby food. When my daughter was born 18 months ago, I could get it anywhere. I no longer needed to make the trip to Whole Foods for it. The same goes for potatoes, tomatoes, and tons of other items.
It isn't that the economy is the main driver changing consumer behavior, it is the fact that Mackey is no longer operating in a market of one, but thousands. Consumers have a plethora of choices and given the choice of the same potato at $2 vs $.75, the cheaper option always wins.